NOK CORPORATION and Consolidated Subsidiaries
Consolidated Financial Results for the First Quarter Ended June 30, 2008
Date: July 31, 2008 Name of Listed Company: NOK Corporation
Securities Code Number: 7240 URL http://www.nok.co.jp Representative: Masato Tsuru
Chairman of the Board and President Contact Person: Toshio Tominaga
Department Manager
Corporate Planning Department Date of submission of quarterly report: August 8, 2008
Listed on the Tokyo Stock Exchange,
Telephone: +81-3-3434-1736
(Fractions are rounded down to the nearest million yen)
1. Consolidated Business Results for the First Quarter of Fiscal 2008 (April 1, 2008 to June 30, 2008)
(1) Consolidated operating results (year-to-date basis) (Percentage figures represent year-on-year changes.)
Net sales Operating income Ordinary profit Net income
million yen % million yen % million yen % million yen %
1Q FY 2008 132,368 – 8,902 – 10,152 – 7,258 –
1Q FY 2007 125,976 7.8 10,960 (7.5) 12,728 (2.5) 7,325 (0.4)
Net income per share Diluted net income per share
yen yen
1Q FY 2008 41.97 –
1Q FY 2007 42.36 –
(2) Consolidated financial position
Total assets Net assets Capital ratio Net assets per share
million yen million yen % yen
1Q FY 2008 520,297 285,804 50.8 1,528.16
FY 2007 532,759 298,247 51.4 1,583.93
Reference: Shareholders’ equity: 264,255 million yen (as of June 30, 2008) 273,910 million yen (as of March 31, 2008)
2. Dividends
Dividends per share
(Base date) 1Q-end Interim 3Q-end Final Total annual
yen yen yen yen yen
FY2007 – 10.00 – 10.00 20.00
FY2008 – – – – –
FY2008 (Projection) – 10.00 – 10.00 20.00
Note: Quarterly dividend projections have not been revised.
3. Consolidated Performance Forecasts for Fiscal 2008 (April 1, 2008 to March 31, 2009)
(Percentage figures represent year-on-year changes.) Net sales Operating income Ordinary profit Net income Net income per share
million yen % million yen % million yen % million yen % yen
Half year 272,000 – 18,800 – 20,500 – 11,100 – 64.19
Full year 556,000 5.6 44,500 4.8 48,0007.1 7.1 26,500 2.5 153.24
Note: Consolidated performance forecasts have not been revised.
4. Other Information
(1) Changes in significant subsidiaries during the term (change in specific subsidiaries due to change in the scope of consolidation): None
(2) Application of simplified accounting treatments and accounting treatments specific to the preparation of quarterly consolidated financial statements: Yes Note: For details, please refer to “Qualitative Information and Financial Statements, etc.” on page 3.
(3) Changes in principles, procedures and presentation, etc. of accounting treatment relating to preparation of quarterly consolidated financial statements (matters to be described as significant changes in the basic principle for preparation of quarterly consolidated financial statements):
i) Changes due to amendments to accounting standards, etc.: Yes ii) Changes other than those described in i) above: Yes
Note: For details, please refer to “Qualitative Information and Financial Statements, etc.” on page 3.
(4) Number of shares issued and outstanding (common stock) i) Number of shares issued and outstanding
as of end of the term (including treasury stock): 173,138,537 (as of June 30, 2008); 173,138,537 (as of March 31, 2008) ii) Number of treasury shares: 213,939 (as of June 30, 2008); 207,757 (as of March 31, 2008) iii) Average number of shares during the term (year to date): 172,928,664 (1Q FY 2008) 172,943,626 (1Q FY 2007)
*Notice concerning proper use of projections of operating results and other important matters:
a) The projections in this material were prepared based on judgments and assumptions drawn from information available as of the date of preparation of this document, and contain uncertainties. Please note that actual business results may differ significantly from these projections depending on various factors.
Significant factors that may affect actual business performance include but are not limited to the economic conditions prevailing in and around the business arena of the Company and its Group companies, market trends and foreign exchange rates of the yen against the U.S. dollar and other currencies.
b) Projections for fiscal 2008 as announced on May 12, 2008 have not been revised.
c) “Accounting Standard for Quarterly Financial Reporting” (Accounting Standards Board of Japan Statement No. 12) and “Guidance on Accounting Standard for Quarterly Financial Reporting” (ASBJ Guidance No. 14) have been applied to the consolidated results starting from the current fiscal year (ending March 31, 2009). In addition, quarterly consolidated financial statements were prepared in accordance with the “Regulations on Quarterly Consolidated Financial Statements.”
Qualitative Information and Financial Statements, etc.
1. Qualitative information concerning consolidated operating results
Reflecting surges in the prices of oil and other raw materials and an economic slowdown in the United States, uncertainty about the future prospects of the Japanese economy mounted during the first quarter of the current fiscal year (ending March 31, 2009).
In the Japanese automobile industry, production expanded due to higher sales, particularly in Asia and emerging markets, despite reduced sales in the domestic market.
In the electronic equipment industry, production of mobile phones, hard disk drives (HDDs) and digital still cameras increased as a result of buoyant demand in emerging markets. However, the market as a whole continued its downward trend in product prices.
In the business machine sector, production volume for copiers, etc. increased due to robust demands in emerging markets, offsetting a dip in demand in North America, where capital spending has decreased.
The performance of each business segment against this backdrop is outlined below.
In the seal business, reflecting an increase in sales, particularly in Asia and emerging markets, of fuel-efficient models made by Japanese manufacturers against a background of high oil prices, the production volume of Japanese automakers’
automobiles increased both in terms of exports and production at overseas plants. In addition, production volumes of Japanese construction machinery manufacturers increased, generating higher sales as a result of expanding global demand for construction equipment. As a consequence, segment sales rose 8.0% on a year-on-year basis to 72,544 million yen.
Operating income rose 1.2% year on year to 6,381 million yen, despite steep increases in the prices of steel and other raw materials.
In the flexible printed circuit (FPC) business, NOK recorded higher production volumes and sales of FPCs for digital still cameras due to an increase in demand across both the compact and single-lens reflex segments of the market. As a result, segment sales increased 4.1% compared with the same period last year to 45,953 million yen. In contrast, operating income for the first quarter declined 35.6% year on year to 2,627 million yen, negatively affected by an increase in costs mainly related to the development of overseas production facilities in addition to lower profits associated with adverse currency movements recorded with FPCs for HDDs.
In the roll business, segment sales fell 7.7% compared with the first quarter of last year to 9,717 million yen. This reflected a number of adverse factors, including an ongoing slide in business machine demand in North America; unit price declines caused by the entry of Chinese manufacturers into the sector; and shrinkage in the after-sales market for copiers associated with increasing durability. The segment posted an operating loss of 279 million yen, which represented a decline of 542 million yen on a year-on-year basis. This was primarily attributable to steep increases in raw material prices and currency translation effects.
Consolidated net sales for the three-month period ended June 30, 2008 totaled 132,368 million yen, an increase of 5.1%
compared with the same period in the previous year. Operating income amounted to 8,902 million yen, a year-on-year decline of 18.8%, while ordinary profit fell 20.2% year on year to 10,152 million yen. Net income for the first quarter of the fiscal year ending March 2009 was 7,258 million yen, a decrease of 0.9% from a year earlier.
2. Qualitative information on consolidated financial position
Total consolidated assets as of June 30, 2008 amounted to 520,297 million yen, decreasing by 12,461 million yen compared with the end of the previous fiscal year (March 31, 2008). This decline is mainly attributable to the adverse effect of the appreciation of the yen in the foreign exchange translation of the assets of the consolidated overseas subsidiaries, which offset the growth in assets due to capital investments.
Total liabilities as of June 30, 2008 amounted to 234,493 million yen, a decrease of 18 million yen compared with the previous fiscal year-end. While income taxes payable and reserve for employee bonus payments decreased, short-term borrowings increased to finance payment of income taxes and employee bonuses.
Net assets as of June 30, 2008 totaled 285,804 million yen, a decrease of 12,442 million yen from the previous fiscal year-end. This was mainly a reflection of lower translation adjustments associated with yen appreciation. The capital ratio at the end of the first quarter was 50.8%.
(Status of Cash Flows)
Cash and cash equivalents (hereinafter, “fund”) as of June 30, 2008 decreased 4,121 million yen to 34,657 million yen from the end of the previous fiscal year’s consolidated results. The consolidated status of cash flows for the first quarter of the current fiscal year is outlined below.
(Cash flows from operating activities)
Fund generated through operating activities reached 3,424 million yen, decreasing 40.8% on a year-on-year basis. This is mainly attributable to a decrease in income before taxes and minority interests.
(Cash flows from investing activities)
Fund used in investing activities was 13,523 million yen, a year-on-year decrease of 0.2%, as a result of acquisition of tangible fixed assets including investments for expansion of production at home and abroad.
(Cash flows from financing activities)
Fund generated from financing activities amounted to 9,661 million yen, an increase of 69.2% compared with the same period last year. This result is a reflection mainly of scheduled repayments of long-term borrowings, while short-term fund was newly borrowed to apply to tax payment and working capital.
3. Qualitative information on consolidated business performance forecasts
There is no change in the business performance forecasts announced on May 12, 2008.
4. Other information
(1) Changes in significant subsidiaries during the term (change in specific subsidiaries due to change in the scope of consolidation):
Not applicable.
(2) Application of simplified accounting treatments and accounting treatments specific to the preparation of quarterly consolidated financial statements
1. Simplified accounting treatments
For measurement of inventories as of the end of the term, some consolidated subsidiaries omitted a physical inventory check, and calculated the amount of inventories by a reasonable method based on the physical inventory check conducted as of the end of the previous fiscal year.
2. Accounting treatments specific to the preparation of quarterly consolidated financial statements
As to tax expense, some consolidated subsidiaries calculated the amount by reasonably estimating an effective tax rate after applying tax effect accounting to income before income taxes and minority interests for the consolidated fiscal year containing the current first-quarter period, and multiplying such estimated effective tax rate by income before income taxes and minority interests.
Deferred income tax is included in income taxes.
(3) Changes in principles, procedures and presentation, etc. of accounting treatment relating to preparation of quarterly consolidated financial statements
・Changes in matters concerning accounting standards
1. “Accounting Standard for Quarterly Financial Reporting” (Accounting Standards Board of Japan Statement No. 12) and “Guidance on Accounting Standard for Quarterly Financial Reporting” (ASBJ Guidance No. 14) have been applied to the consolidated results starting from the current fiscal year (ending March 31, 2009). In addition, quarterly consolidated financial statements were prepared in accordance with the “Regulations on Quarterly Consolidated Financial Statements.”
2. With regard to inventories held for sale in the ordinary course of business, finished goods and work-in-process goods of the parent company and its consolidated domestic subsidiaries were previously stated mainly at cost on a retail method basis, and raw materials and stored goods were measured at cost, based on the periodic average method.
However, with the Company’s adoption of “Accounting Standard for Measurement of Inventories” (ASBJ Statement No. 9) from the first quarter ended June 30, 2008, finished goods and work-in-process goods of the parent company and its consolidated domestic subsidiaries are measured at cost on a retail method basis (balance sheet value is stated by writing down carrying value based upon lowered profitability), and raw materials and stored goods are mainly stated at cost, based on the periodic average method (balance sheet value is stated by writing down carrying value based upon lowered profitability).
The impact of this change on operating income, ordinary profit and income before income taxes and minority interests is insignificant.
3. “Practical Solution on Unification of Accounting Policies Applied to Overseas Subsidiaries for Consolidated Financial Statements” (ASBJ Practical Issues Task Force No. 18) has been applied from the first quarter ended June 30, 2008, and necessary modifications have been made for consolidation.
The impact of this change on operating income, ordinary profit and income before income taxes and minority interests is a decrease of 135 million yen for each.
4. Finance lease transactions without title transfer were formerly accounted for as operating lease. However, application was permitted of “Accounting Standard for Lease Transactions” (ASBJ Statement No. 13) and “Guidance on Accounting Standard for Lease Transactions” (ASBJ Guidance No. 16) to the consolidated quarterly financial statements relevant to the fiscal year beginning on or after April 1, 2008. As a result, the Company adopted the aforementioned standard and guidance from the first quarter of the current fiscal year for consolidated results, capitalizing all finance lease transactions. In addition, leased assets related to finance lease transactions without title transfer are depreciated on a straight-line basis, with the lease periods as their useful lives and no residual value.
Finance lease transactions without title transfer of which the starting dates of lease transactions are prior to the beginning of the fiscal year to which such accounting standard and guidance is applied are accounted for as operating leases.
The impact of this change on operating income, ordinary profit and income before income taxes and minority interests is insignificant.
・Additional information
The amendment of the Corporate Tax Law in fiscal 2008 included the shortening of the useful lives of machinery and equipment. In accordance with such amendment, the Company and its consolidated domestic subsidiaries have shortened the useful lives of machinery and equipment from the first quarter of the current fiscal year in the consolidated results.
The impact of this change on operating income, ordinary profit and income before income taxes and minority interests is a decrease of 328 million yen for each.
5. Quarterly Consolidated Financial Statements (1) Quarterly Consolidated Balance Sheet
(million yen) As of end of 1Q FY 2008
(June 30, 2008)
Summary of consolidated balance sheet as of end of FY
2007 (March 31, 2008) Assets
Current assets
Cash and deposits 35,762 39,756
Notes and accounts receivable 121,828 125,369
Finished goods 20,194 20,680
Raw materials 9,006 10,500
Work in process Other
18,986 19,291
18,749 20,413
Allowance for doubtful accounts (958) (995)
Total current assets 224,112 234,475
Fixed assets
Tangible fixed assets
Buildings and structures (net) 69,919 68,494
Machinery, equipment and vehicles (net) Other (net)
81,583 46,669
84,730 47,733
Total tangible fixed assets 198,171 200,958
Intangible fixed assets
Goodwill 2,424 2,825
Other 1,507 1,686
Total intangible fixed assets 3,932 4,512
Investments and other assets
Investments in securities 62,091 59,774
Other 32,210 33,261
Allowance for doubtful accounts (220) (223)
Total investments and other assets 94,081 92,812
Total fixed assets 296,185 298,283
Total assets 520,297 532,759
Liabilities
Current liabilities
Notes and accounts payable-trade Short-term borrowings
Income taxes payable
Allowance for employee bonuses Other allowances and reserves Other
56,036 58,977 3,079 5,497 550 44,309
59,972 45,706 7,255 8,230 799 44,842
Total current liabilities 168,451 166,806
Fixed liabilities
Long-term borrowings Reserve for retirement benefits Other allowances and reserves
9,787 48,676 1,349
13,724 47,546 1,326
(million yen) As of end of 1Q FY 2008
(June 30, 2008)
Summary of consolidated balance sheet as of end of FY
2007 (March 31, 2008)
Other 6,228 5,107
Total fixed liabilities 66,041 67,705
Total liabilities 234,493 234,511
Net assets
Shareholders’ equity Common stock
Additional paid-in capital Retained earnings Treasury stock
23,335 22,451 201,170 (235)
23,335 22,451 197,464 (223)
Total shareholders’ equity 246,723 243,029
Valuation and translation gains/losses Net unrealized gains on other securities Translation adjustments
20,549 (3,016)
17,988 12,892
Total valuation and translation gains/losses 17,532 30,881
Minority interests 21,549 24,337
Total net assets 285,804 298,247
Total liabilities and net assets 520,297 532,759
(2) Quarterly Consolidated Income Statement (First-quarter period on a year-to-date basis)
(million yen) 1Q FY 2008 on a year-to-date basis
(April 1, 2008 to June 30, 2008) Net sales
Cost of sales
132,368 106,485
Gross profit 25,883
Selling, general and administrative expenses Salary and allowances
Increase in allowance for bonuses Retirement and severance costs Other SG&A expenses
4,353 1,077 481 11,068
Total SG&A expenses 16,981
Operating income 8,902
Non-operating income
Dividends received 485
Equity in earnings of affiliates 1,270
Other 663
Total non-operating income 2,419
Non-operating expenses Interest paid
Currency translation losses Other
624 336 208
Total non-operating expenses 1,169
Ordinary profit 10,152
Extraordinary gains
Reversal of allowance for doubtful accounts Reversal of reserve for retirement benefits Other
150 104 116
Total extraordinary gains 372
Extraordinary losses
Loss on disposal of fixed assets Other
160 123 283 10,240 2,343 638 Total extraordinary losses
Income before income taxes and minority interests Income taxes
Minority interests
Net income 7,258
(3) Quarterly Consolidated Cash Flow Statement
(million yen) 1Q FY 2008 on a year-to-date basis
(April 1, 2008 to June 30, 2008) Cash flows from operating activities
Income before income taxes and minority interests Depreciation expense
Increase (decrease) in allowance for bonuses Increase (decrease) in reserve for retirement benefits Interest and dividend income
Interest payments
Currency translation losses (gains) Equity in earnings of affiliates (gains) Amortization of goodwill
Loss on disposal of fixed assets
Decrease (increase) in notes and accounts receivable Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable Increase (decrease) in bills discounted
Other
10,240 8,962 (2,727) (641) (661) 624 (149) (1,270) 400 160 (651) (1,369) (1,359) (3,346) 1,331
Subtotal 9,542
Interest and dividends received Interest paid
Income taxes paid
858 (889) (6,086)
Net cash flows from operating activities 3,424
Cash flows from investing activities
Net decrease (increase) in time deposits (226)
Proceeds from sale and redemption of investments in securities Payments for purchase of tangible fixed assets
626 (14,165) Proceeds from sale of tangible fixed assets
Other
268 (26)
Net cash flows from investing activities (13,523)
Cash flows from financing activities
Net increase (decrease) in short-term borrowings Proceeds from long-term borrowings
Repayment of long-term borrowings Payment of cash dividends
Dividend payments to minority shareholders Other
13,734 821 (2,157) (1,582) (1,103) (51)
Net cash flows from financing activities 9,661
Adjustment on foreign currency translation of cash and cash equivalents (3,684)
Net increase (decrease) in cash and cash equivalents (4,121)
Cash and cash equivalents at beginning of period 38,779
Cash and cash equivalents at end of period 34,657
“Accounting Standard for Quarterly Financial Reporting” (ASBJ Statement No. 12) and “Guidance on Accounting Standard for Quarterly Financial Reporting” (ASBJ Guidance No. 14) have been applied to the consolidated results starting from the current fiscal year (ending March 31, 2009). In addition, quarterly consolidated financial statements were prepared in accordance with the “Regulations on Quarterly Consolidated Financial Statements.”
(4) Notes concerning the assumptions of going concerns:
Not applicable.
(5) Segment Information
a. Segment information by business category
1Q FY2008 (April 1, 2008 to June 30, 2008) (year-to-date basis) (million yen) Seal FPC Roll Other Total Eliminations/
Corporate Consolidated Net sales
(1) Sales to external customers 72,544 45,953 9,717 4,153 132,368 – 132,368
(2) Inter-segment sales/transfer 1,109 364 – 321 1,795 (1,795) –
Total 73,654 46,318 9,717 4,474 134,164 (1,795) 132,368
Operating income (loss) 6,381 2,627 (279) 173 8,904 (2) 8,902
b. Segment information by geographic area
1Q FY2008 (April 1, 2008 to June 30, 2008) (year-to-date basis) (million yen)
Japan Asia Other
areas Total Eliminations/
Corporate Consolidated
Net sales
(1) Sales to external customers 82,728 45,625 4,015 132,368 – 132,368
(2) Inter-segment sales/transfer 11,901 7,968 276 20,146 (20,146) –
Total 94,629 53,594 4,291 152,515 (20,146) 132,368
Operating income 5,155 3,476 57 8,689 212 8,902
c. Overseas sales
1Q FY2008 (April 1, 2008 to June 30, 2008) (year-to-date basis) (million yen)
Asia Other areas Total
I Overseas sales 50,457 7,312 57,769
II Consolidated sales – – 132,368
III Percentage of overseas sales in consolidated sales
38.1% 5.5% 43.6%
(6) Notes in case of significant changes in the amount of shareholders’ equity Not applicable.
Reference:
Financial Statements for 1Q FY 2007
(1) Quarterly Consolidated Income Statement (summary)
1Q FY 2007
(April 1, 2007 to June 30, 2007) Item
Amount (million yen)
I Net sales 125,976
II Cost of sales 98,849
Gross profit 27,127
III Selling, general and administrative expenses 16,167
Operating income 10,960
IV Non-operating income 2,461
Interest and dividend income 671
Equity in earnings of affiliates 1.018
Other 771
V Non-operating expenses 693
Interest paid 484
Other 208
Ordinary profit 12,728
VI Extraordinary gains 507
VII Extraordinary losses 113
Income before income taxes and minority interests 13,122
Income taxes 4,882
Minority interests 914
Net income 7,325
(2) Quarterly Consolidated Cash Flow Statement (Summary)
1Q FY 2007 (April 1, 2007 to June 30, 2007)
Category Amount (million yen)
I Cash flows from operating activities:
Income before income taxes and minority interests 13,122
Depreciation expense 7,176
Decrease in notes and accounts receivable 150
Decrease in inventories 81
Decrease in notes and accounts payable (3,591)
Other (4,068)
Subtotal 12,871
Income taxes paid (7,265)
Other 176
Net cash flows from operating activities 5,782
II Cash flows from investing activities:
Payments for purchase of tangible fixed assets (14,183)
Other 638
Net cash flows from investing activities (13,544)
III Cash flows from financing activities:
Net increase (decrease) in short-term borrowings 8,973
Proceeds from long-term borrowings 1,687
Repayment of long-term borrowings (2,029)
Payment of cash dividends by the parent company (1,554)
Other (1,366)
Net cash flows from financing activities 5,709
IV Adjustment on foreign currency translation of cash and cash equivalents
2,017 V Net increase (decrease) in cash and cash equivalents (35) VI Cash and cash equivalents at beginning of the term 42,298 VII Increase in cash and cash equivalents due to change in the
scope of consolidation
375 VIII Cash and cash equivalents at end of the term 42,638
(3) Segment information
a. Segment information by business category
1Q FY2007 (April 1, 2007 to June 30, 2007) (million yen)
Seal FPC Roll Other Total Eliminations/
Corporate Consolidated
Net sales
(1) Sales to external customers
67,151 44,140 10,523 4,160 125,976 – 125,976
(2) Inter-segment sales/transfer
630 291 – 434 1,355 (1,355) –
Total 67,781 44,432 10,523 4,594 127,332 (1,355) 125,976
Operating expenses 61,472 40,351 10,260 4,296 116,381 (1,364) 115,016
Operating income 6,308 4,080 263 298 10,951 8 10,960
b. Segment information by geographic area
1Q FY2007 (April 1, 2007 to June 30, 2007) (million yen)
Japan Asia Other areas Total Eliminations/
Corporate Consolidated
Net sales
(1) Sales to external customers
78,689 42,387 4,899 125,976 – 125,976
(2) Inter-segment sales/transfer
10,812 5,818 282 16,913 (16,913) –
Total 89,502 48,206 5,181 142,890 (16,913) 125,976
Operating expenses 82,322 44,452 5,118 131,893 (16,877) 115,016
Operating income (loss) 7,179 3,754 63 10,996 (36) 10,960
c. Overseas sales
1Q FY2007 (April 1, 2007 to June 30, 2007) (million yen)
Asia Other areas Total
I Overseas sales 45,962 7,191 53,153
II Consolidated sales – – 125,976
III Percentage of overseas sales in consolidated sales
36.5% 5.7% 42.2%
